Latvia as a Fintech Licensing Jurisdiction: MiCA, Payment Institutions and Neobanks — Regulatory Framework and Strategic Considerations for 2026

I. Introduction: Latvia's Strategic Position in the European Fintech Landscape

As MiCA implementation reaches full maturity across the European Economic Area, jurisdiction selection has become one of the most consequential strategic decisions for fintech and digital asset businesses entering the EU market. The competitive dynamics have shifted: firms are no longer simply seeking regulatory tolerance, but rather a combination of supervisory clarity, infrastructure depth, and operational efficiency.

Latvia has emerged as one of the most structurally sound choices in this environment. Underpinned by the government-approved Fintech Strategy — which sets a national mandate to increase the number of licensed fintech companies by one third compared to 2025 levels — Latvia's regulatory evolution in 2026 reflects a deliberate, coordinated effort across legislative, supervisory, and infrastructure dimensions.

The depth of market interest is already measurable. Latvijas Banka currently has 15 companies in the active licensing stage and 29 companies in the pre-licensing consultation stage — over 44 live projects simultaneously, with applicants from Poland, Spain, Germany, Turkey, Canada, the United Kingdom, and beyond. This pipeline reflects not aspiration, but demonstrated demand.

II. The Regulatory Anchor: MiCA and the Law on Crypto-Asset Services

Latvia achieved early-mover advantage by enacting the national "Law on Crypto-asset Services" (Kriptoaktīvu pakalpojumu likums) effective 30 June 2024. The transition period that permitted legacy firms to operate without full authorisation closed on 30 June 2025. The market is now fully stabilised under a mature, MiCA-compliant regime providing legal certainty and investor protection.

Latvijas Banka acts as the single competent authority, exercising centralised supervision over all Crypto-Asset Service Providers (CASPs). The Bank operates in alignment with ESMA and EBA recommendations and actively verifies the competence and professional standards of individuals providing crypto-asset services — ensuring parity with traditional financial services regulation.

Under the MiCA framework, ten specific services require a CASP licence in Latvia: custody and administration of crypto-assets; operation of a trading platform; exchange of crypto-assets for funds; exchange of crypto-assets for other crypto-assets; execution of orders on behalf of clients; placing of crypto-assets; reception and transmission of orders; providing advice on crypto-assets; providing portfolio management; and providing transfer services.

The primary strategic benefit remains EU-wide passporting: a single authorisation from Latvijas Banka permits a firm to offer these services across all 30 EEA states under the cross-border notification regime, without further local licensing requirements.

III. Capital Structure and Licensing Costs

Latvia's tiered CASP capital structure enables firms to align regulatory requirements with operational complexity and business model:

• Class 1 (€50,000 minimum): Crypto-asset advice, portfolio management, reception and transmission of orders, execution of orders, placing, and transfer services.
• Class 2 (€125,000 minimum): All Class 1 services, plus custody and administration of crypto-assets, and exchange of crypto-assets for funds or other crypto-assets.
• Class 3 (€150,000 minimum): All Class 2 services, plus operation of a crypto-asset trading platform.

Class 2 and Class 3 licences represent the operational sweet spots for exchanges and custody-focused platforms, encompassing the core revenue drivers of the digital asset sector.

From a cost perspective, Latvia offers the most accessible entry point in the EU. The application fee for a CASP is €2,500 — the lowest in the European Union. The annual supervision fee is structured at 0.6% of gross revenue, with a minimum floor of €3,000. This cost structure positions Latvia among the most competitively priced MiCA jurisdictions in the EEA.

IV. The Structured Path to Authorisation

Latvia's licensing process is a primary competitive differentiator, built on a partnership model between regulator and applicant. The process comprises three distinct stages:

• Consultation Stage: Applicants access free, unlimited consultations with Latvijas Banka experts. Documents may be submitted in English during this phase — a significant practical advantage for international firms. Approximately 100 free consultations are provided annually.
• Pre-Licensing Stage: A qualitative assessment of the business plan, governance framework, and operational readiness. This stage prevents premature formal submissions and ensures firms fully understand supervisory expectations before incurring formal fees.
• Official Licensing Stage: A strict 25-working-day completeness check followed by a 40-working-day qualitative assessment. Final submission documents must be provided in Latvian.

In well-prepared cases, full authorisation can be achieved within 60 to 90 days of final submission. The overall end-to-end process, including pre-licensing preparation, typically takes three to six months.

As Santa Purgaile, Deputy Governor of Latvijas Banka, has stated:

"The goal is to create a structured and efficient licensing process that helps prepare companies for the requirements set for a regulated financial market participant and facilitates the smooth receipt of authorisations."

V. Operational Substance Requirements

Latvijas Banka's substance requirements are clearly defined, providing applicants with regulatory certainty from the outset. Virtual office arrangements are not permitted, and firms must demonstrate genuine operational presence within the jurisdiction.

Key requirements include:

• A physical office in Latvia where crypto-asset services are actively managed
• A board of 2–3 directors (“at least several“), with at least one EU-resident director; a Latvian resident director is viewed favourably by the regulator
• A dedicated AML officer with appropriate KYC/KYT systems and tools
• Full operational documentation: business plan, IT security framework, business continuity plan, and internal control procedures

AML Credibility: Latvia's anti-money laundering framework received significant international validation in February 2026, when a MONEYVAL report rated Latvia's AML systems among the highest in the region. This assessment has directly reinforced international confidence in the jurisdiction and encouraged institutional-grade applicants to pursue Latvian authorisation.

VI. Beyond MiCA: Payment Institutions, EMI, and the Neobank Licence

Latvia's regulatory reform extends well beyond the crypto-asset sector. The jurisdiction offers a full spectrum of EEA financial licences, including electronic money institution (EMI) and payment institution authorisations — each carrying the same EU-wide passporting benefit under PSD2.

Since January 2026, the Credit Institution Law has included a new specialised credit institution licence with a reduced initial capital threshold of €1M, compared to €5M for standard banking licences. Designed specifically for neobanks and digital-first financial institutions, this licence enables innovative firms to compete in the credit sector without the prohibitive capital requirements of legacy banking models, provided they maintain a digital-only service model. Several companies have already expressed interest in this new licence category.

Together, these frameworks position Latvia as a full-spectrum fintech licensing jurisdiction — capable of accommodating the regulatory needs of payment fintechs, digital banks, crypto exchanges, and custody platforms within a single supervisory relationship.

VII. Fiscal Framework

Latvia's tax environment is structured to incentivise capital reinvestment and support scaling:

• Corporate Income Tax (CIT): 0% on undistributed or reinvested profits; 20% applies upon distribution of profits.
• The 0.8 Coefficient: The 20% CIT applies to the gross distributed amount. To calculate tax on a net distribution, the taxable base is divided by 0.8 (e.g., a €100 net dividend results in a €25 tax liability).
• Crypto Capital Gains: 25.5% tax on cryptocurrency transaction profits.
• Personal Income Tax (2026): 25.5% on annual income up to €105,300; 33% above €105,300; a 3% surcharge applies to income exceeding €200,000.

VIII. Infrastructure Advantages

Latvia's infrastructure credentials reinforce its position as a functional fintech hub rather than a purely regulatory gateway:

• Direct SEPA Access: The Electronic Clearing System (EKS) enables non-bank payment service providers to participate directly in SEPA payments. As of 2026, 13 institutions participate in the EKS — including 10 licensed in other EU countries — with further participants preparing to join.
• Instant Payee Verification: Latvia is one of only two Eurozone countries offering an Instant Verification Service, allowing real-time payee name verification. This service is used not only by Latvian commercial banks but also by central banks and non-bank payment providers across the euro area.
• Baltic Regional Cooperation: Latvia operates within the broader Baltic fintech ecosystem, supported by coordinated AML intelligence-sharing between the Financial Intelligence Units of Latvia, Lithuania, and Estonia — providing effective regional risk mitigation for legitimate market participants.

IX. Practical Application: The Backpack EU Authorisation

The practical viability of Latvia's framework is demonstrated by the authorisation of Trek Technologies SIA, operating under the international brand Backpack EU. ECOVIS ProventusLaw advised Trek Technologies through the MiCA licensing process, resulting in the successful grant of a CASP licence by Latvijas Banka.

The authorisation enables Backpack EU to provide custody and administration of crypto-assets, exchange of crypto-assets for funds and other crypto-assets, execution of orders for crypto-assets on behalf of clients, and transfer services across all 30 EEA states under the MiCA passporting regime.

This outcome reflects the broader trend of established international crypto platforms selecting Latvia as their regulated entry point into the European digital asset market.

X. About the Authors

Inga Karulaitytė is a top-tier FinTech and financial regulatory lawyer in Lithuania and the Baltics, and Partner and Head of Banking, Finance & FinTech at ECOVIS ProventusLaw. With over 20 years of experience, she advises electronic money institutions, payment service providers, investment firms, and crypto-asset businesses on MiCA, PSD2, AML/CFT, sanctions, and cross-border licensing. She has supported over 80 licensing projects since 2014, including more than 40 EMI, payment institution, and MiCA authorisations across the Baltic states. Co-founder of the Lithuanian FinTech Association. Ranked in FinTech Legal by Chambers and Partners (2020–2026) and Highly Regarded in Banking and Finance by IFLR1000 and The Legal 500 (2019–2026). Shortlisted for Thought Leader of the Year – CEEMEA, IFLR Women in Business Law Awards 2026.

Loreta Andziulytė is a Partner and Attorney-at-Law at ECOVIS ProventusLaw, heading the firm's Data Protection, Employment, and Corporate Commercial teams. With over 20 years of experience, she advises on corporate governance, regulatory compliance, GDPR, DORA, and fintech licensing matters. Ranked in FinTech Legal by Chambers and Partners (2020, 2023–2026) and recognised by The Legal 500 in FinTech, Employment, TMT, and Dispute Resolution (2019–2025).

Gvido Lošaks is a Senior Associate and Associate Attorney-at-Law at ECOVIS ProventusLaw Latvia, registered with the Latvian Bar Association. He holds a Ph.D. in law (Dr. iur., 2025) and an ICA Advanced Certificate in Governance, Risk and Compliance. Gvido advises on Latvian licensing and compliance, AML/CFT, corporate law, and regulatory matters, providing on-the-ground Latvian legal expertise across the firm's fintech and digital asset mandates.

ECOVIS ProventusLaw is a top tier business law firm with presence across all three Baltic states — Lithuania, Latvia, and Estonia — and part of the ECOVIS International network operating in more than 90 countries worldwide. The firm has supported over 80 licensing projects since 2014, including more than 40 EMI, payment institution, and MiCA authorisations across the Baltic states. Consistently ranked by Chambers and Partners, IFLR1000, and The Legal 500 (2019–2026) in FinTech, Banking & Finance, and related practice areas.